Airlines Are Making Millions from a FAA Shutdown

Congress failed to pass new legislation to fund the Federal Aviation Agency by Friday so the agency is now unable to collect taxes on excises, fuel and cargo. FAA head Randy Babbitt told reporters on Monday that which is costing the agency millions of dollars of lost revenue a day. The situation amounts to a tax holiday for airlines. One would think that travelers might save a buck or two from the airlines' windfall, but Scott McCartney at The Wall Street Journal reports they are not in a sharing mood:

Except that most airlines raised their prices quickly to soak up the tax savings. Prices for buyers remained roughly the same--but airlines get to keep more of the fare. Fair?

Alaska Airlines and Spirit Airlines were the notable exceptions that let consumers have the savings. Virgin America passed the savings on over the weekend, but Monday morning raised prices in many markets, except where it competes with Alaska on the West Coast. United, Delta, American, Southwest, US Airways, jetBlue and Frontier all raised prices over the weekend by at least 7.5%, according to Rick Seaney, chief executive of FareCompare.com.

McCartney explains that no matter when you travel, your would-be taxes will go to the airline rather than the FAA until Congress can figure out a funding package for it. Until Congress reaches a deal--subsidies for rural airports and unionization rights for employees are the sticking points--the FAA is out a total of $200 million a week or roughly $30 million a day.